Why Nation Fail?

In recent time ago, I heard conversation between Russ Robert and Daron Acemoglu in Economic Library (Econlib). This podcast program is held in every Monday and undertaken by Econlib. I am very pleasant when hear every conversation in Econlib, because all topic related with economic. Economic is my major when I study in university, so I always try to encourage myself to study economic and rehearse my ability in understanding economic concept.

One of topic that is interesting to me is Why Nation Fail?. This podcast talks about the reason why some nation failed, but other nation succeed. Actually, there are many arguments that illuminate the reason behind that. One argues that natural resource is main factor in enhancing economy, but another argues that culture is very important and determines the country performance. These arguments can’t explain well about the question.

In this book, Acemoglu and his friend try to explain the main reason why nation fail. They argue that the welfare create by incentive, and incentive created by institution. So, institution is very important for country performance. The efficacy of institution in enhance economy has been proved by many countries. Investment will be flow drastically if institution in that country is supported. If you look countries that underdeveloped, one reason is because they don’t have good institution that supports economic activity. So, one thing that must be underscored is the need for government to repair its institution if they will attract investment.

The country is fail because its institution is very bad. The investor doesn’t be attracted to invest because it’s creates great transaction cost. Conversely, if institution is supported, the investor will come and build factory in that country. []